Budget 2024: How It Impacts You

Posted on Jan 18, 2017

On April 16, 2024, the Liberal government unveiled its budget, featuring several key announcements:
  • The capital gains inclusion rate rises from 50% to 2/3, effective June 25, 2024, for amounts exceeding $250,000. (Gains up to $250,000 annually for individuals remain at the 50% inclusion rate.)
  • The LCGE (lifetime capital gains exemption) for qualified property (such as qualified small business corporation shares and qualified farming and fishing properties) increases to $1.25 million. Moreover, certain businesses (excluding professional, financial, and real estate corporations, etc.) will benefit from a reduced inclusion rate of only 1/3 for up to $2 million of LCGE, effectively raising the total exemption to $3.25 million.
  • The first-time homebuyer’s RRSP withdrawal limit expands from $35,000 to $60,000 under the Home Buyers Plan (HBP), effective for the 2024 and subsequent calendar years, for withdrawals made after April 16, 2024. Additionally, the repayment grace period under the HBP extends temporarily by three years, to five years, allowing eligible home buyers who withdrew from their RRSP between January 1, 2022, and December 31, 2025, up to five years before commencing repayments to their RRSP.
  • To stimulate the creation of affordable housing, the budget introduces an accelerated capital cost allowance (CCA) and provides relief from interest deductibility limitations for debt incurred to finance the construction of certain purpose-built rental housing.
  • The government grants the Canada Revenue Agency (CRA) additional information-gathering powers, including the authority to levy additional fines for non-cooperation, among other measures.

Canadian Entrepreneurs' Incentive

  • Decreases the capital gains inclusion rate by half.
  • Effective from January 1, 2025, upon the disposition of qualifying shares.
  • Gradually phased in at increments of $200,000, reaching a maximum of $2 million by January 1, 2034.
  • Applies alongside the Lifetime Capital Gains Exemption (LCGE).
Shares must satisfy ALL of the following criteria:
  • At the time of sale, they must be shares of a Small Business Corporation (SBC) owned directly by the claimant.
  • For the 24 months preceding the sale, they must have been shares of a Canadian Controlled Private Corporation (CCPC) and met the 50% asset test.
  • The claimant must have been a founding investor and held the shares for a minimum of 5 years.
  • The claimant must have been actively engaged in the business for 5 years prior to the sale.
  • Throughout the ownership period, the claimant must directly own more than 10% of the votes and value of the shares.
  • The shares must not represent a direct or indirect interest in certain service businesses.
  • The shares must have been acquired at fair market value (FMV).

Disability Supports Deduction

Proposes to extend deductions for individuals with physical or mental impairments, enabling them to deduct specific expenses facilitating business, employment, or educational pursuits. Budget 2024 seeks to broaden the list of eligible expenses under specific conditions, including:
  • Severe and prolonged physical impairments
  • Impairment in physical or mental functions
  • Vision impairments
Recognized expenses may include:
  • The costs of service animals
  • Eligible for claims under the medical expense tax credit or Disability Supports Deduction
  • Applicable for expenses incurred in 2024 and beyond.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) serves to ensure that individuals with numerous tax-preferred items still contribute a minimum tax amount for the year, preventing them from paying little or no tax. Taxpayers are required to pay the higher of their regular tax or the AMT at the federal level. Budget 2023 proposed amendments to the AMT rules, which are currently in draft form. In Budget 2024, adjustments include:
  • Allowing 80% of the charitable donation tax credit when calculating AMT, up from the previously proposed 50%. It's worth noting that in-kind donations to charity remain subject to a 30% inclusion rate for AMT purposes.
  • Additionally, deductions for Guaranteed Income Supplement (GIS), social assistance, and workers' compensation payments are fully permitted under the AMT, along with complete exemption for Employee Ownership Trusts (EOTs). Certain disallowed credits under the AMT may now be eligible for the AMT carryforward, while AMT exemptions are extended to certain trusts benefiting Indigenous Groups.